SCHIP's Race to the Bottom

The New York Times reports that 13 states have sought to bail out out their public-health bureaucracies by raiding taxpayers in the 37 other states. They have marched to the trough to take advantage of the SCHIP expansion signed by President Obama soon after he took office. (The newspaper didn't quite put it like that.)

SCHIP (State Children's Health Insurance Program), of course, creates a "race to the bottom" of government dependency because a state has to spend its own taxpayers' money to "prime the pump" that fills the trough with federal dollars. One silver lining to the cloud of recession is that most states simply do not have access to enough of their own taxpayers' funds to execute this raid.

We can all be thankful.

SCHIP expansion is popular, because it's "for the kids" and the expansion is primarilly financed by taxes on smokers. What the NY Times neglects to note is that SCHIP crowds out private coverage by at least 56%, which will get even worse as states enrol kids from higher-income households, as I've discussed before.

Furthermore, the Wall Street Journal notes a side effect of Government's unhealthy addiction to tobacco taxes - violent crime as states "go to war" on cigarette smuggling (which would not exist without discriminatory taxation).

We are effectively in an era of neo-prohibition, where governments' demonize smokers' peaceful habit in order to seize their earnings to fund a state take-over of children's access to medical services.